A top Wall Street strategist just toured China as trade tensions grip the nation. Here were his biggest takeaways.

FILE PHOTO: U.S. President Donald Trump and China's President Xi Jinping meet business leaders at the Great Hall of the People in Beijing

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FILE PHOTO: U.S. President Donald Trump and China’s President Xi Jinping meet business leaders at the Great Hall of the People in Beijing
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Reuters

  • John Stoltzfus, Oppenheimer Asset Management’s chief investment strategist, recently visited areas in mainland China and Taiwan, including Beijing, Taipei, and Hong Kong.
  • He and his team walked away doubling down on their view that the global economy would suffer from a prolonged trade war between the US and China with no immediate resolution in sight.
  • Stoltzfus ran down down other takeaways from his trip to paint a picture of how the economy is faring there now, and what he was hearing from institutional investors.
  • Visit Markets Insider’s homepage for more stories.

President Donald Trump’s trade war with China has ushered volatility into the stock market, hurt farmers in rural areas of the country, and pushed big investors to bulk up on cash.

And that’s just stateside.

John Stoltzfus, the chief investment strategist at Oppenheimer Asset Management in New York, met with institutional investors in the past week across mainland China, Hong Kong, and Taiwan.

He and his team walked away doubling down on their view that the global economy would further suffer from a prolonged trade war between the US and China with no immediate deal in sight.

“In our view the cost of a protracted trade war is simply too high and too impractical considering the challenges and opportunities that lie on the global and economic landscape and which might be ignored and missed as a result of a protracted trade/tariff war,” Stoltzfus wrote.

The trip arrived at a tense moment for US-China relations and mere weeks before Trump and the Chinese President Xi Jinping are expected to convene at the G20 summit in Osaka, Japan. Economic growth in China has also fallen under a microscope as key measures like retail sales in the country have slowed.

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In a report distributed to clients, Stoltzfus ran down down other takeaways from his trip to paint a picture of how the economy is faring there now and what he heard from institutional investors.

“We noted that ironically year one of the trade war had been less of a negative to both China’s and the US economy than many had expected,” he wrote, citing a robust 2.9% gross domestic product growth in 2018 (still short of Trump’s 3% growth promise) and 6.5% growth in China.

But he added: “We suggested that year two of the trade war might not be so kind to either country.”

Stoltzfus included other more anecdotal observations, like heavy traffic on a Saturday afternoon “consisting mostly of very new looking vehicles that to our eyes looked heavily represented by foreign brands (though with most vehicles likely manufactured in China).”

Here’s a recap of what Oppenheimer’s strategists gleaned from meeting with investment professionals during their week-long trip.


The firm’s trip started out in Beijing, China’s capital city. Traffic was heavy on a Saturday afternoon from the airport to their hotel. The most prominent brands Stoltzfus and his team observed were “Honda, Hyundai, Toyota, Nissan, Mercedes Benz, BMW, Audi, Porsche, Jaguar, Bentley, Chevrolet, Cadillac,” and Ford.

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Hollis Johnson/Business Insider

The strategists visited a nearby shopping mall full of high-end brand names, and observed medium foot traffic. Some of the stores appeared over-staffed, and they were later told by a local that “much of the actual shopping in China for these types of brands takes place online.” Another Beijing local said the trade war had begun taking a toll “on at least some consumer sentiment the longer it dragged on.”

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Sittirak Jadlit/Shutterstock

Tables in an open-concept food court were packed with diners, the team observed, and later saw a similar heavy volume of families and travelers at the restaurant in their hotel.

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By HerryLawford on Flickr

The team of strategists then met with investment strategists in Beijing, and heard concerns about the trade war and implications for the US and Chinese economies. Of note was concern about the impact on China’s technology sector. The takeaway seemed to be that the market participants with whom they met were pessimistic about the prospect of a resolution in the near-term.

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U.S. President Donald Trump and China’s President Xi Jinping arrive at a state dinner at the Great Hall of the People in Beijing.
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Reuters

Next, they went to Taipei, the capital of Taiwan. The investors with whom the strategists met expressed similar concerns to their Mainland China counterparts — but appeared slightly more optimistic on a resolution between Beijing and Washington “before too much longer.”

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A motorcyclist rides past the logo of Foxconn, the trading name of Hon Hai Precision Industry, in Taipei.
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Reuters

Hong Kong was the last stop on the firm’s trip, which happened to coincide with the massive demonstrations there last week in protest of a policy of extradition. The investors were “candid about their concerns with mixed views as to the outcome they expected,” Stoltzfus wrote.

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Members of Civil Human Rights Front hold a news conference in response to the announcement by Hong Kong Chief Executive Carrie Lam regarding the proposed extradition bill, outside the Legislative Council building in Hong Kong
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Reuters

Now, all eyes are on Osaka.

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China’s President Xi Jinping (L) and US President Donald Trump attend a welcome ceremony at the Great Hall of the People in Beijing on November 9, 2017.
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Nicolas Asfouri/AFP/Getty Images

SEE ALSO:

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US President Donald Trump and China’s President Xi Jinping (not shown) make a joint statement at the Great Hall of the People on November 9, 2017 in Beijing, China. Trump is on a 10-day trip to Asia.
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Thomas Peter-Pool/Getty Images

A Wall Street firm pinpointed 8 corners of the market most vulnerable to trade war-induced chaos